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The FSTC is a dollar-for-dollar tax credit of up to $1,700 per individual taxpayer for contributions to state-approved, federally recognized non-profits that distribute scholarships to eligible children. There is no cap on the total amount of donations, and it is a permanent tax credit with no sunset. The program requires states to opt in.

Any taxpayer can receive federal tax credits for making qualified contributions to a Scholarship Granting Organization. An SGO is a tax-exempt organization providing scholarships to students. Taxpayers would receive a dollar-for-dollar federal tax credit up to $1,700 each year for donations to SGOs. 

• Scholarship awards will be limited to low-income students with household incomes are at or below 300% of the median income in their county.  Visit HUD Income Limits to learn more.  
• Scholarship recipients can be enrolled in any K-12 school, whether it be traditional public, public charter, private, religious or homeschools.
• The organizations responsible for distributing these scholarships, known as Scholarship Granting Organizations, must: be a federally recognized nonprofit; serve at least ten students across more than one school; and allocate at least 90% of donations to approved educational expenses. SGOs must also verify the income of participating families. 
• Once enrolled at an eligible school, scholarships can be used for expenses including tuition, fees, tutoring, special needs services, books, supplies, computers, room and board, and transportation. Fees for standardized or college admission exams, fees for dual enrollment or educational therapies for students with disabilities, are also allowed.

• It is an opt-in program, meaning states choose whether to participate. However, while a state can choose not to participate, it cannot stop its taxpayers from donating to SGOs in other states or students from crossing state lines to receive an FSTC scholarship and attend a school in a participating state.   Find out the status of your state here.
• Governors or other agencies or individuals designated by state law, must approve the SGOs.
• The tax credit is capped at $1,700 per taxpayer.  With average private school tuition around $15,000, nine taxpayers will have to contribute the $1,700 maximum to fund a scholarship for a single student in need.

Pennsylvania's Educational Improvement Tax Credit program provides critical scholarships to income-qualifying students across the Commonwealth. 

EITC participants redirect their PA tax liability to the program and receive a 90% tax credit for the amount of their contribution. This tax credit is applied to the PA tax liability for the calendar year in which the contribution is made. They may also be able to claim a federal deduction for the remaining 10% which means it costs less than a dime to contribute a dollar to the schools they support. 

The above-referenced federal deduction may be impacted by an FSTC contribution.  The federal bill contains the following: 

REDUCTION BASED ON STATE CREDIT. —The amount allowed as a credit under subsection (a) for a taxable year shall be reduced by the amount allowed as a credit on any State tax return of the taxpayer for qualified contributions made by the taxpayer during the taxable year. 

Pennsylvania will need to opt into the federal program. 

Taxpayers will be eligible to receive the tax credits for donations made to SGOs beginning in January 2027. As for families wishing to benefit from the scholarships funded by this new federal program, they must await their state’s decision about joining the scholarship program. 

Pennsylvania Education Partnership LLC is actively working with schools, nonprofit organizations, and government officials, to prepare for the start of the FSTC program. 

If your school wishes to PEP to manage its FSTC outreach and participation, please be in touch.